With respect to the current ratio,the declaration of a cash dividend will:

Question

Quizplus · Accepted Answer

The declaration of a cash dividend will reduce the amount of available cash on the balance sheet, which will decrease the current assets of the company. As a result, the current ratio, which is calculated as current assets divided by current liabilities, will decrease. Therefore, option C is correct. Option A is incorrect, as the current ratio will be affected by the reduction of current assets. Option B is also incorrect because the market price of the stock is irrelevant to the current ratio. Finally, option D is incorrect as a decrease in current assets will lead to a decrease in the current ratio, not an increase.

With Respect to the Current Ratio,the Declaration of a Cash